Flight Capital as a Portfolio Choice

33 Pages Posted: 14 Feb 2006

See all articles by Paul Collier

Paul Collier

University of Oxford - Blavatnik School of Government

Anke Hoeffler

University of Oxford - Centre for the Study of African Economies (CSAE)

Catherine A. Pattillo

International Monetary Fund (IMF) - Research Division

Date Written: December 1999

Abstract

This paper sets flight capital in the context of portfolio choice, focusing upon the proportion of private wealth that is held abroad. There are large regional differences in this proportion, ranging from 5 percent in South Asia to 40 percent in Africa. We explain cross-country differences in portfolio choice by variables that proxy differences in the risk-adjusted rate of return on capital. We apply the results to four policy questions: how the East Asian crisis affected domestic capital outflows; herd effects; the effect of the IMF-World Bank debt relief initiative for heavily-indebted poor countries (HIPC) on capital repatriation; and why so much of Africa's private wealth is held outside the continent.

Keywords: Capital flight, portfolio choice

JEL Classification: G11, F21, F32, F34, O16

Suggested Citation

Collier, Paul and Hoeffler, Anke and Pattillo, Catherine, Flight Capital as a Portfolio Choice (December 1999). IMF Working Paper No. 99/171, Available at SSRN: https://ssrn.com/abstract=880826

Paul Collier (Contact Author)

University of Oxford - Blavatnik School of Government ( email )

10 Merton St
Oxford, Oxfordshire OX1 4JJ
United Kingdom

Anke Hoeffler

University of Oxford - Centre for the Study of African Economies (CSAE) ( email )

Oxford OX1 3UL
United Kingdom
+44 1865 274 554 (Phone)
+44 1865 274 558 (Fax)

Catherine Pattillo

International Monetary Fund (IMF) - Research Division ( email )

700 19th Street NW
Washington, DC 20431
United States

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